QROPS Advice: Investment News: The case for multi-asset funds

The first month of 2010 has been marked by a deluge of multi-asset fund launches. A week ago, Heartwood Wealth Management announced the launch of its CF Heartwood Cautious Multi-Asset and Growth Multi-Asset Funds, which will be followed soon with the launch of the Balanced and Balanced Income Funds. The new multi-asset funds will invest primarily in third party funds, including alternatives, structured products and derivatives as appropriate.
Other recent launches include Prudential's range of five multi-asset funds with different risk levels: Defensive, Cautious, Cautious Growth, Balanced and Adventurous, and Scottish Widows Investment Partnership (SWIP)'s SWIP Multi-Manager Optimal Multi-Asset Fund, a higher risk/return follow-up to its cautious SWIP Multi-Manager Diversity Fund launched in 2007. Allianz Global Investors is another provider expected to launch a multi-asset fund.
The recent hike in multi-asset fund launches brings some truth to predictions by industry players and independent financial advisers (IFAs) that multi-asset funds will be the "hot financial product" of 2010. The term 'multi-asset funds' refers to funds which invest across several asset classes and fund managers, which means investors are not exposed to the market gains or losses of just one asset class. Ultimately, multi-asset managers create the potential for capital growth and the conditions where the better performers may offset the poor performers.
Investors' desire to spread investment risk, coupled with the low interest rate environment in which it is hard to get returns on cash, have been touted as some of the reasons behind the increased focus on diversified strategies.
Another, more pressing, reason behind the spate of launches is the need for IFAs to meet the demands of growing regulation, such as the Financial Services Authority's (FSA) Treating Customers Fairly (TCF) initiative and the Retail Distribution Review (RDR). These require IFAs to ensure a fair deal for consumers and consider as wide as possible a range of investment products to meet client risk and investment objectives.
So what benefits do multi-asset funds hold for the private investor?
By: Leonora Walters